The Flow of Consciousness

It all started a year or two ago when I decided to buy $250 worth of stock in Transmeta (TMTA), which had recently released a new processor design and licensed some technology to Intel or one of the other major processor manufacturers. A few weeks later, and unbeknownst to me, TMTA performed a reverse split to increase the value of its stock and avoid delisting. The stock price went from $8 to $15 and my shares went from approximately 30 to approximately 16. The bad part is that the stock price kept dropping. It was at $12 when I decided to cut my losses and cash out. I lost approximately $32 on that venture.

I convalesced for a while, nursing my $32 wound (not a lot of money, but a chunk for a college kid). I continued to read; continued to list stocks I wanted to watch in my Google Finance porfolios.

I started again last summer (July?) with 17,000 shares of Linux Gold Corporation (LNXGF), $1,020 worth of 6 cent shares. I noticed that the stock was highly volatile: its intraday range was generally between .06 and .10. I hoped to hit that .10 sweet spot for a nice gain. Unfortunately, that day never came after I bought the stock. It stuck at .06 for days, weeks, months. Sometimes it would hit .07, but that wasn’t enough for me. One day, it hit .08, but I was busy working and didn’t catch the spike.

Eventually, I set a limit sell for .07 for 13,400 shares and .065 for the other 3,600. After commission, I got back approximately $1146, a $126, 12% profit. Not bad for someone who had idiotically lost $32 a few months prior.

I would later learn a lot more about the role of volume, and realize that it may have taken days of .10 to offload my 17,000 shares. I would have been better off farming it for that one penny gain all along: buy low, sell high.

In October 2008, the market crashed on account of several American banks’ and insurance companies’ financial insolvency and the American auto makers’ financial revelations. Stocks which were valued in the high tens were suddenly in the low tens, or even in the ones.

By the end of October, I knew that it was certainly a buyer’s market: a cautious buyer’s market, but for most stocks, the only direction to go was up.

I read up on dividends and decided that I wanted to acquire enough holdings in something that I would see some kind of divided check once a quarter. The amount didn’t really matter; I wanted the majesty of telling my father and grandfather that I made a dividend since they both love to use the phrase “it pays dividends”.

I bought 100 shares of Diana Shipping (DSX), a Greek dry shipping company. This set me back by approximately $800 (8.00/share), but the dividend which it was supposed to be paying in two or three days was .39, so I’d see a check for $39 by the end of the year. Unfortunately, I misunderstood the “holders of record” definition and didn’t get the check: I bought in a day late. I decided to hold onto it, as I knew it could only get better. DSX announced that it was suspending its dividend, though, so I was in the hole $800 and wasn’t going to get that skinny little dividend check.

I did some more research and settled on Euroseas (ESEA), another Greek dry shipping company. I got in at $5.65 knowing that, this time, I would get the dividend. It came—all $17.00 of it—and I rejoiced! I made a dividend! w00t!

Unfortunately, my call about “things only going up” was incorrect when applied to ESEA. As of this writing, it’s at $4.84, but has been growing fairly steadily since hitting a low at $3.51 in January. I got another dividend in March, though, but it was less than $10.

My positions as of Apr. 17

Since then, I acquired some cash from various sources and bought into other companies. My favorite and the poster child for my “buyer’s market” theory is Star Bulk Carriers (SBLK), another Greek dry shipper. I got in at $1.30 and again at $2.87. It’s currently at $3.01 and I’m in for the long haul. The company is nearly two years old and had a 55.98% profit margin in 2008, paying an 18 cent dividend plus new shares in December. If the dividend holds, I could see a more than $500 dividend when it’s issued in May or June.

I bought into a few other companies somewhere in there, including Level3 Communications (LVLT — made a 28% profit when sold), Taiwan Semiconductor (TSM — advised to buy by my now-former boss, still holding), and Ford Motor Company (F — made a 60% profit when sold).

Recent acquisitions include Vonage (VG) using profits from the sale of some hard assets and Converted Organics (COIN) using proceeds from the sale of F, at the behest of some reputable folks whom I’ve been following on Twitter. One guy made something like $117,000 last week — 30% profit, if I recall correctly — through JAVA, WYNN, DNDN, and a few others.

VG is poised to take off once a brokerage offloads ~400,000 shares. I’d be happy with a 10%-15% gain based on the amount I have in it. However, the theory is that it will hit .60 from its current .37-.40 range as AT&T (T) shuts down its VoIP phone service and customers flock to more proven providers such as Vonage.

COIN, on the other hand, burned me. I chased it. Kunal called it at .82-.83, but I was hasty and got in at .95 with a hefty chunk of change. I’ll sell it as soon as I can make up the cost of commission or it drops to the point that I’ve lost my profits on F.

Stocktwits is an amazing Twitter mashup which connects amateur investors with seasoned professionals and savvy part-timers. I look forward to getting in on their advice and making a dollar or two along the way. I know I’m still quite green and I don’t have a lot of time during the day to watch for spikes, so indispensable is the guidance of those whose livelihoods depend on their good calls.